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U.S. Cellular plans move to tiered data, continues to bleed subs in Q2

U.S. Cellular continued to struggle with subscriber losses in the second quarter, despite making gains in ARPU and smartphone penetration. Interestingly, the company also said it expects to unveil tiered data price plans within the next two to three quarters, but did not provide further details.

Click here for key slides from U.S. Cellular's second quarter performance.

The Tier 2 carrier also posted jumps in net income and revenue. The company reported net income of $73.9 million, up from $40.8 million in the year-ago quarter. Total revenue climbed 4 percent to $1.076 billion, and service revenues were up 3 percent to $1.002 billion.

Subscriber losses continued to plague the carrier, however, and U.S. Cellular CEO Mary Dillon said on the company's earnings conference call that the quarter was "mixed" and subscriber results were "disappointing." However, she noted a growing number of customers migrating to the carrier's Belief Project plans, and said these customers are spending more money on data services. The carrier ended the period with 2.3 million Belief Project customers.

Meanwhile, U.S. Cellular continued its aggressive push into smartphones, and said that smartphones, as a percentage of total devices sold, increased to 39.6 percent in the quarter. Smartphones now represent 23 percent of the company's postpaid subscriber base. Dillon said that later this year U.S. Cellular will launch a new smartphone from Motorola Mobility (NYSE:MMI) and its third tablet. She also promised new advertising initiatives to drive gross subscriber additions. She noted that the company's LTE launch plans for November remain on track and that the company is working with OEMs to finalize LTE device plans.

In June, U.S. Cellular said that by year-end it will launch seven smartphones running Google's (NASDAQ:GOOG) Android platform (including one LTE smartphone) along with two tablets. Last month the company began offering shoppers a $100 credit toward their bills through Sept. 8 if they switch to the carrier and sign up for a contract with a smartphone.

Here is a breakdown of the carrier's key quarterly metrics:

Subscribers: U.S. Cellular reported net subscriber losses of 58,000 retail customers, which included a loss of 41,000 postpaid customers and 17,000 prepaid customers. The company said postpaid customers comprised 95 percent of retail customers at the end of the quarter. U.S. Cellular served 5.64 million total customers at the end of the quarter.

Churn: The company's postpaid churn rate was 1.4 percent, flat from both the first quarter and the year-ago period.

ARPU: The carrier's postpaid average revenue per user clocked in at $51.84, up from $50.55 in the year-ago period. It was the fifth straight quarter of ARPU increases.

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